Last close As at 07/08/2026
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Research: Investment Companies
Riverstone Credit Opportunities Income (RCOI) reported an H123 NAV total return (TR) of 4.1%, with all loan investments in its portfolio performing to plan (also with respect to key sustainability performance indicators embedded in the loan terms). In June 2023, RCOI participated in the refinancing of the Streamline Innovations loan, which allowed it to realise a gross internal rate of return (IRR) of 23.6% and multiple on invested capital (MOIC) of 1.29x on the original US$13.8m loan (after a holding period of 13 months). RCOI reinvested US$9.9m into a new loan to Streamline Innovations, with an estimated all-in yield to maturity of 13%. It declared a quarterly dividend of 2.0 US cents per share (in line with the previous quarter). At the current c 17% discount to NAV (including income), the last 12-month (LTM) payment now implies a c 10% dividend yield.
Riverstone Credit Opportunities Income |
Continues to benefit from healthy yields |
Investment companies |
29 August 2023 |
*As at 30 June 2023.
Bull points
Bear points
Analyst
Riverstone Credit Opportunities Income is a research client of Edison Investment Research Limited |
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Riverstone Credit Opportunities Income (RCOI) reported an H123 NAV total return (TR) of 4.1%, with all loan investments in its portfolio performing to plan (also with respect to key sustainability performance indicators embedded in the loan terms). In June 2023, RCOI participated in the refinancing of the Streamline Innovations loan, which allowed it to realise a gross internal rate of return (IRR) of 23.6% and multiple on invested capital (MOIC) of 1.29x on the original US$13.8m loan (after a holding period of 13 months). RCOI reinvested US$9.9m into a new loan to Streamline Innovations, with an estimated all-in yield to maturity of 13%. It declared a quarterly dividend of 2.0 US cents per share (in line with the previous quarter). At the current c 17% discount to NAV (including income), the last 12-month (LTM) payment now implies a c 10% dividend yield.
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RCOI continues to distribute dividends in line with target |
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Source: RCOI. Note: *Including 2 US cents declared in respect of Q223. |
Playing on ‘net zero’ transition in the energy sector
Close to 100% of RCOI’s investment portfolio consists of senior secured, floating rate loans (with interest rate floors), which are either structured as sustainability-linked loans (which tie loan economics to meeting specific sustainability performance targets) or green loans (used to fund new green energy infrastructure or the conversion of older assets to more sustainable use). The mid-market segment remains underserved by the banking sector, providing good opportunities for direct lenders with specialist knowledge such as RCOI to fill in the gap. RCOI is therefore well placed to benefit from the transition to ‘net zero’ within the mid-market energy sector, with Riverstone Credit Partners (RCP), its investment manager, now pursuing a c US$500m investment pipeline.
Target dividend looks well covered
RCOI’s targeted dividend yield of 8–10% on its IPO price of US$1.00 looks well covered (assuming no portfolio defaults). This is underpinned by the normalisation in the interest rate environment (current Secured Overnight Financing Rate, SOFR, of c 5.30%), confidence that RCOI will stay close to fully invested, as well as key portfolio metrics. These metrics include (on a weighted average basis as at end-June 2023): 1) a floating rate spread of 710bp, 2) a call premium at entry of 102.6%, 3) a structuring fee and/or original issue discount of 97.5% par and 4) a moderate loan to value ratio of 40%.
Loan book performing in line with expectations
RCOI posted an NAV TR of 4.1% in H123, with income and gains primarily coming from recurring interest income on its loan portfolio. This brought its NAV TR since listing in May 2019 to 37.8%. RCOI’s one-year NAV TR in sterling terms of 9.3% is ahead of the average for the three peers we consider most relevant (see Exhibit 1), ranking second after BioPharma Credit, while its three-year NAV TR is broadly in line with the peer group average.
Exhibit 1: Selected investment peer group at 29 August 2023* in sterling terms
% unless stated |
Market cap £m |
NAV TR |
NAV TR |
Premium/ |
Ongoing charge** |
Performance |
Net gearing |
Dividend |
Riverstone Credit Opportunities |
63.5 |
9.3 |
30.3 |
(17.2) |
1.5 |
Yes |
100*** |
10.0 |
BioPharma Credit |
868.0 |
9.7 |
29.2 |
(17.7) |
1.1 |
Yes |
100 |
8.4 |
GCP Asset Backed Income |
246.9 |
2.0 |
12.9 |
(37.9) |
1.2 |
No |
106 |
10.9 |
VPC Specialty Lending Investments |
198.4 |
5.1 |
42.8 |
(23.7) |
2.1 |
Yes |
133 |
11.2 |
Peer average |
437.8 |
5.6 |
28.3 |
(26.4) |
1.5 |
- |
113 |
10.2 |
Rank |
4 |
2 |
2 |
1 |
1 |
- |
3 |
3 |
Source: Morningstar, Edison Investment Research. Note: *Performance to end-June 2023. **Excluding performance fee. RCOI’s LTM ongoing charge ratio including profit share expenses stands at 3.1%. RCOI’s investment manager does not charge a base management fee. ***Calculated at the holding level based on the fair value of investments in SPVs, which had US$5m in drawn credit and US$2.8m in cash balances at end-June 2023. TR, total return in sterling terms. Net gearing is total assets less cash and equivalents as a percentage of net assets (100 = ungeared).
Weighted average all-in coupon at 11.7% at end-H123
RCOI’s total income in H123 stood at US$4.6m, or 4.7% of end-2022 NAV, which implies 9.4% on an annualised basis. This is somewhat below the weighted average all-in coupon across RCOI’s portfolio of 11.7% at end-June 2023 (with a weighted average spread of c 710bp). This is partly because the SOFR rate increased gradually during H123 from 4.30% to 5.09% and the coupon rate on most of RCOI’s loans is reset (based on the prevailing benchmark rate) on a quarterly basis.
In H123, RCOI earned a 1.75% upfront fee on its US$9.9m allocation to the new Streamline Innovations loan, as well as the 2% call premium on the original US$13.8m loan (see below for details of the transaction), which we estimate added c 0.5pp to its H123 NAV TR (before profit share expenses). We understand that RCOI recognised a downward revaluation in its energy transition bucket (whose fair value fell from c US$16.6m at end-2022 to US$14.8m at end-June 2023), which was due to a lower valuation of the Imperium3NY warrants (see our previous note for a borrower profile description).
RCOI’s total expenses amounted to US$1.0m in H123, or c 1.0% of its average NAV in the period. This includes US$0.4m of profit share expenses, which are derived from a three-tiered incentive system: payment is 0% up to an annual distributable income of 4%, 20% is paid out of income between 4% and 8%, and 30% out of distributable income greater than 8%. We note that RCOI does not pay a base management fee to its investment manager.
RCOI’s cash flow from operations of US$4.8m in H123 was in line with its P&L total income and fully covered the US$4.5m interest and dividend distributions during the period. RCOI was close to fully invested at end-June 2023, with 98% of liquidity committed and 91% invested. RCOI’s manager therefore remains confident in the company’s ability to maintain its dividend yield target of 8–10% on its IPO price of US$1.00.
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Exhibit 2: RCOI’s portfolio by project at end-June 2023 |
Exhibit 3: RCOI’s portfolio by sector at end-June 2023 |
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Source: Riverstone Credit Opportunities Income data |
Source: Riverstone Credit Opportunities Income data |
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Exhibit 2: RCOI’s portfolio by project at end-June 2023 |
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Source: Riverstone Credit Opportunities Income data |
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Exhibit 3: RCOI’s portfolio by sector at end-June 2023 |
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Source: Riverstone Credit Opportunities Income data |
At the current c 17% discount to cum income NAV (see Exhibit 4), the LTM dividend payments imply a solid 10% yield.
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Exhibit 4: RCOI’s discount to NAV including income (percentage) |
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Source: Morningstar |
Refinancing of Streamline Innovations completed in June 2023
In terms of transactions during the period, RCOI completed the refinancing of the loan to Streamline Innovations, a sponsor-backed provider of environmentally advanced treatment solutions and equipment for hydrogen sulphide. The company has more than 40 treating plants in service or fabrication with a total capacity to eliminate the flaring of over 100m pounds of toxic sulphur oxide per year and eliminate the production of more than 50m gallons of hazardous waste per year.
The original loan was fully realised in June 2023 at a US$2.0m realised profit, implying a 23.6% gross IRR and a 1.29x gross MOIC. As part of the refinancing, the loan was upsized by US$10m to US$55m (it was previously upsized from US$20m in November 2021 to US$45m in May 2022), but RCOI’s allocation was reduced from US$13.8m to US$9.9m to manage its portfolio concentration. Moreover, the call protection embedded in the loan was modified and the pricing was adjusted (see Exhibit 5), implying a yield to maturity of c 13%.
RCOI’s manager highlighted that the performance of the Streamline Innovations project has met or exceeded its expectations, with expected 2023 EBITDA of US$21.7m (implying a c 79% y-o-y increase and a 1.0x gross leverage) and US$61.2m of liquidity as of July, translating into a net cash position (with US$26.2m in cash and US$35m in unfunded term loans). The manager also underlined that the project continues to win new contracts in the oil & gas sector from blue-chip operators such as Chevron, Continental and Franklin Mountain. Streamline Innovations also continues to build out its renewable natural gas capabilities, although market penetration has been below expectations, according to RCP.
Exhibit 5: Terms of the Streamline Innovations loan (current versus previous)
Terms |
Previous |
Current |
Credit facility (US$m) |
45 |
55 |
Lenders |
RCP II, RCOI and affiliates |
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RCOI's allocation (US$m) |
13.8 |
9.9 |
Use of proceeds |
To construct H2S treating equipment, to fund interest expense and pay transaction fees and expenses |
To construct H2S treating equipment, fund interest expense and pay transaction fees |
Security |
First lien |
First lien |
Tenor |
Three years |
31 December 2026 (c 3.5 years) |
Pricing |
Libor +800bp cash |
Adjusted term SOFR +700bp |
Redemption price (%) |
Year 1: 100.0 |
Year 1: non-call |
Financial covenants |
Maximum leverage ratio |
Net leverage ratio |
Negative covenants |
Limitation on debt, liens and restricted payments |
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Source: Riverstone Credit Opportunities Income data
RCP pursuing a c US$500m investment pipeline
RCP highlighted that it maintains a rich investment pipeline and is currently pursuing seven primary deals with a total of c US$500m commitments, which could be partly allocated to RCOI (based on its available liquidity). The investment manager is submitting term sheets with conditions broadly in line with those of RCOI’s current portfolio, with spreads of 650–900bp, upfront fees of c 2–3% and inverse call protections.
Exhibit 6: RCOI’s current investment pipeline
Date |
Project name |
Type of company |
Total deal size (US$m) |
RCP size (US$m) |
Equity ownership |
Description |
GL/SLL* |
Jan-23 |
Sandy |
Infrastructure |
75 |
75 |
Private |
Silica extraction |
SLL |
Jan-23 |
Nitro |
Infrastructure |
150 |
80 |
Sponsor |
Greenhouse gases to biomaterial |
SLL |
Jan-23 |
Stack |
Infrastructure |
50 |
50 |
Sponsor |
Modular nuclear power |
GL |
Mar-23 |
Core |
Infrastructure |
65 |
65 |
Private |
Geothermal |
GL |
Jun-23 |
Clay |
Infrastructure |
45 |
45 |
Private |
Materials |
GL |
Jul-23 |
Trek |
Infrastructure |
60 |
60 |
Sponsor |
CO2 capture |
GL |
Source: Riverstone Credit Opportunities Income data. Note: *GL, green loans; SLL, sustainability-linked loans.
RCOI highlighted that its liquidity for new investments (as at 25 July) stood at US$8.8m. This includes cash held at the holding and SPVs level, holdings in a money market fund with JP Morgan, and the US$10m of the undrawn revolving credit facility (all of which was available for drawdown at end-June 2023 based on the loan-to-value covenant of 22%), adjusted for unfunded investment commitments, distribution payable, and a reserve for expenses, as well as profit share.
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Investment Companies
Investment Companies
Research: Metals & Mining
Alkane Resource’s FY23 financial results were broadly in line with our forecasts, with profit after tax totalling A$42.5m (compared to our forecast of A$44.0m) and EPS of 7.10c (cf 7.38c). Cash flows from operations exceeded our forecasts (A$95.5m cf A$75.6m) as a result of an increase in deferred tax liabilities, albeit this was balanced by higher exploration capex of A$58.1m to result in a net cash flow of A$4.1m (cf A$2.4m). Following FY23 production of 70,253oz at an all-in sustaining cost (AISC) of A$1,602/oz, FY24 guidance for Tomingley is 60,000–65,000oz at an AISC of A$1,750–2,100/oz. Our forecasts remain largely unchanged in the aftermath of Alkane’s FY23 results. We maintain our valuation.